NZ system ruled out as suspect in ASX turmoil

SecuritEase's software was not a factor as far as ASX is concerned, says spokesman

Wellington software developer SecuritEase is expecting a clean bill of health when investigators report on the causes of recent sharemarket turmoil in Australia.

SecuritEase was named in The Australian newspaper as contributing to broker Tricom Equities’ inability to settle trades at the end of January and in early February — the first time in over 30 years a broker has been unable to settle.

The failure sent the Australian Securites Exchange (ASX) into a tailspin, with shares falling sharply over two days of uncertainty.

ASX spokesman Matthew Gibbs told Computerworld that SecuritEase’s software was not a factor as far as the regulator is concerned and referred queries to Tricom.

SecuritEase founder Bill Tonkin says he doesn’t know where the suggestion the company’s software was involved came from. Tricom installed the software late last year, the first Australian broker to adopt the New Zealand platform.

“SecuritEase is viewed as part of the solution, not part of the problem,” he says.

Tonkin says if there was a problem with the software it would have been evident in the first few days of installation, in mid-December.

“The system is in, successful and people have been backed out,” he says.

Tonkin says Tricom’s issues were a product of market economics and the business model the broker uses.

He says the software changes were only part of an ambitious project at Tricom which saw it bring its clearing and settlement processes back in-house, after these had been outsourced to a third party, at the same time as the new software was introduced.

The Australian’s report was based, in part, on an initial statement by Tricom, saying its troubles were exacerbated by the introduction of a “new internal settlement and clearing system”. That statement did not specifically mention software and, according to The Australian, was later withdrawn.

Tonkin says SecuritEase is helping Tricom get over its troubles. He expects the software to get a clean bill of health when the dust settles.

The Australian reported that some Tricom clients had complained about the SecuritEase software. But Tonkin says it is largely invisible to such clients.

Tricom failed to settle trades on January 29. It settled all outstanding debts the following day. The broker operates under a model unique in Australia, under which ownership of the shares officially transfers to Tricom, rather than directly from the seller to the buyer. This allows Tricom to on-lend the shares to others, enabling short-selling where it might not otherwise be possible.

SecuritEase is the most commonly used front-office and back-office broking system on the New Zealand Stock Exchange.

Australian reports suggest the company is considering moving away from its margin-lending model altogether, a further indication the broker’s problems are to do with its business model rather than its systems.

Calls to Tricom Equities were not returned by Computerworld’s deadline.

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